December 7, 2010
IN THE MATTER OF THE ESTATE OF LOUIS S. GRANT, SR., DECEASED.
On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Hunterdon County, Docket No. 39487.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 13, 2010 -
Before Judges Rodriguez and LeWinn.
These appeals, calendared back-to-back, are both addressed in this opinion. We have consolidated these appeals for purposes of this opinion. They concern issues in a protracted will contest between appellant, decedent's son Louis, Jr. (Junior), and respondents, decedent's daughters Virginia Liotta and Nancy Grant. Junior appeals on leave granted from two orders of the trial court. In No. A-0078-09, he appeals from the trial court's order of July 14, 2009 denying his request to declare certain funds "an ademption by satisfaction," and ordering those funds "to be treated as part of the net distributable estate." In No. A-0079-09, Junior appeals from the trial court's order of June 15, 2009, directing him to convey to his sisters two-thirds of the L.S. Grant Properties Limited Partnership (the Partnership) and denying his request to declare that a prior decision in this matter on November 8, 2004, supports his claim to this asset in its entirety.
Litigation in this matter commenced four months after decedent's death in 2001, when Junior filed a complaint seeking: (1) to remove Virginia as co-executor of decedent's estate; (2) to grant letters testamentary to himself and Nancy; and (3) to admit decedent's April 16, 1998 will to probate. Virginia and Nancy filed an answer and counterclaim: (1) asserting that Junior had exercised undue influence on decedent; (2) seeking to have an earlier will, dated January 27, 1992, admitted to probate; and (3) demanding that Junior "return to the Estate all assets in his possession and control."
A nine-day trial ensued between December 15, 2003 and October 22, 2004. Judge John H. Pursel rendered a lengthy decision on November 8, 2004, rejecting the daughters' claim of undue influence and entering judgment in favor of Junior. The daughters appealed and we affirmed "substantially for the reasons set forth in" Judge Pursel's decision. In re the Estate of Grant, No. A-2014-04 (App. Div. May 3, 2007) (slip op. at 3).
We summarize the factual background pertinent to the issues raised in this appeal from Judge Pursel's comprehensive findings of fact in his decision.
Decedent was born on December 15, 1910. During his lifetime, decedent was in the "horse tack . . . and . . . horse auction business," which "grew to be very successful." Junior left high school in the tenth grade to work with decedent in the business, known as Roosevelt Sales Stables. Virginia and Nancy also helped and were generally familiar with the nature of the business. Decedent was engaged primarily in horse auctions; Junior primarily ran the tack business.
The gravamen of the dispute in the earlier trial was the daughters' claim that Junior had exerted undue influence on decedent as evidenced by the following provision in decedent's 1998 will:
ARTICLE FOURTH: Provided that my son, [Junior], shall survive me, I do hereby give, bequeath and devise so much of the tack and inventory as I may die possessed of in an unincorporated business known as "Roosevelt Sales Stables" to my son, [Junior].
Junior "had always been in charge of Roosevelt Sales Stables' line of business involving the purchase and sale of 'tack'. Roosevelt Sales Stables' line of business involving the auctions of horses ceased no later than 1995 as a result of [decedent's] disability commencing in 1994."
Decedent liquidated the inventory in the tack business in 1999. The proceeds, in the amount of $977,849, were deposited into decedent's Roosevelt Sales Stables bank account. Sometime thereafter in 1999, Junior opened his business, Roosevelt Sales.
Judge Pursel noted that decedent had a series of Wills and Codicils in which he treated all of his children equally but showed a preference to his son . . . for the tack business. On occasion he limited to a dollar figure the amount of inventory that could be transferred from the business in the event of [his] death. However, at the time of decedent's death he owned no inventory as it had been liquidated prior to his death. The Wills initially provided that the tac[k] business would go to the son and that the inventory, which he received in that, was limited sometimes to $500,000 and sometimes to somewhat less than that. In other respects all three children were treated equally.
On December 21, 1999, decedent met with his attorney, his accountant and Junior to discuss the creation of the Partnership, to which ownership of the business' property in Edison would be transferred. Decedent intended that all three children benefit from the Partnership. He signed two assignments of limited partnership interest and sent them to Nancy and Virginia for their signatures. Neither daughter, however, ever executed the assignments. Therefore, the Partnership agreement was executed by decedent and Junior only. Decedent held a one percent interest as the General Partner and a ninety-eight percent interest as a Limited Partner; Junior held a one percent interest as a Limited Partner.
Two attorneys representing decedent contacted Virginia's husband, also an attorney, who had asked to review the assignments. Both attorneys "had follow-up communications through May, 2000 with [Virginia's husband] to obtain signed
[a]ssignments from Nancy and Virginia." When it "became obvious that [Virginia's husband] was not responding to their inquiries and that executed [a]ssignments would not be received from Nancy and Virginia, the Partnership documents were finalized in order to achieve the advantages sought by [decedent]."
Virginia's husband "acted as and was the lawyer for Nancy and Virginia with respect to their decision not to execute the [a]ssignments by which to acquire interests in the Partnership." Thus, "[it] was [Virginia's husband] who clearly and unequivocally waived any interest in the [partnership] on behalf of the sisters."
Judge Pursel's order of November 8, 2004 states that "defendants' counterclaims . . . hereby are dismissed. Judgment is entered in favor of . . . plaintiff and against . . . defendants on all counts." However, in his decision, the judge did not specifically address the daughters' demand that Junior return the estate assets in his possession and control.
On March 18, 2008, another trial judge entered an order disqualifying Junior and his sisters as executors of decedent's will. This order also appointed John Manfreda as administrator and attorney for the estate.*fn1 A third judge decided the motions that are the subject of this appeal.
During the pendency of plaintiff's motions, Manfreda submitted his proposed findings of fact and conclusions of law, which included the following findings pertinent to the issues on appeal: (1) the "net proceeds from the sale of the [business] inventory amounted to $977,849.00"; (2) "[a]t some point in 1999 or 2000, . . . the amount of $977,849.00 . . . w[as] transferred to Junior," as evidenced by the Federal Estate Tax Return Form 706 for decedent's estate which Junior filed with the Internal Revenue Service in May 2005; (3) on Form 706, Junior "characterized certain funds received by him from the [d]ecedent in the amount of $1,092,764.00 as 'advances of inheritance[,]' . . . broken down as follows: (i) [i]ndebtedness owed to the Estate by Junior in the amount of $114,926.49[;] (ii) [c]ash advancement to Junior in the amount of $977,849.00"; (4) Junior "subsequently paid in full his debt to the Estate in the amount of $114,926.49"; (5) "[n]either Virginia . . . nor Nancy . . . participated in any way in the preparation of . . . Form 706"; (6) "[d]ecedent did not file a Federal Gift Tax Return evidencing a transfer to Junior of $977,849.00 in cash"; (7) "[d]ecedent did not file a Federal Gift Tax Return with respect to the transfer to Junior of the remaining tack and inventory of his business."
Based on those proposed findings, Manfreda concluded that decedent "never made a gift to Junior of the remaining tack and inventory of his . . . business" or "of the net cash proceeds from the sale of the remaining tack and inventory of his . . . business." Therefore, Manfreda further concluded, "[t]he remaining tack and inventory of . . . [d]ecedent's . . . business was not transferred in kind to Junior pursuant to Article Fourth of . . . [d]ecedent's Will, since no such tack and inventory existed as of the date of . . . [d]ecedent's death." Manfreda did not address the Partnership.
In denying Junior's motion with respect to the Partnership, the judge rejected Junior's contention that Judge Pursel had already decided this issue in his favor, namely that he had no obligation to convey two-thirds of the Partnership to his sisters. The motion judge noted that Judge Pursel's ruling dismissing the daughters' counterclaims was based upon his rejection of their claim that Junior had exerted undue influence over decedent.
Further, the motion judge quoted the following language from Judge Pursel's decision to support the denial of Junior's motion: "There was never a gift made by the decedent to the two daughters or to the son for that matter but simply a formation of a limited partnership in which the daughters did not join."*fn2
Junior's appendix, however, contains documents reflecting the following. On June 6, 2000, decedent filed a Gift Tax Return for 1999, indicating a gift to Junior of 91.7 percent of the Partnership, for a listed value of $212,973. On January 15, 2001, decedent filed another Gift Tax Return for the year 2000, gifting 4.3 percent of the Partnership to Junior, for a listed value of $9987.
The judge's decision does not mention these two Gift Tax Returns. The daughters state in their brief that Junior did not produce these tax documents "at trial." It is unclear whether "at trial" means at the trial before Judge Pursel or in connection with the motions that are the subject of this appeal.
The daughters note that the Partnership agreement provides that a Limited Partner may "[g]ift . . . or otherwise transfer for no consideration . . . all or part of his . . . Limited Partnership Units." They contend, however, that such transfers, must be made pursuant to the terms of the agreement, which include the following:
(d) The [t]ransferor's and [t]ransferee's execution and delivery of such instruments, in form and substance satisfactory to the General Partners, as the General Partners deem necessary or desirable to effect such transfer and to confirm the agreement of the [t]ransferee to be bound by all of the terms and provisions of this [a]greement; . . . .
(i) The instrument conveying such interests has been delivered to the General Partners for recordation on the books of the Partnership .. . .
Manfreda contends for the first time on appeal that Junior (1) "has not produced fully executed assignments of the [P]artnership interests," and (2) rests his "entire argument . . . on the existence of certain [G]ift [T]ax [R]eturns that he alleges were signed by [d]ecedent." Manfreda asserts that even if those returns were executed by decedent, "as a matter of law the filing of such [G]ift [T]ax [R]eturns does not establish the [d]ecedent's donative intent, which is a requisite to the finding of a valid gift." Manfreda, however, provides us with no authority to support this contention.
We concur with Junior that the motion judge's reference to the sentence in Judge Pursel's decision, that no "gift" was made by decedent "but simply the formation of a Limited Partnership in which the daughters did not join," is not dispositive of this issue. Rather, the question is whether decedent ultimately gifted the entire Partnership to Junior as evidenced by the tax documents.
We note that there is a degree of consistency between the Gift Tax Returns proffered by Junior and the undisputed evidence that the daughters never executed the assignments of Partnership interest. Therefore, Junior's position that this Partnership was the subject of a gift to him during decedent's lifetime has merit.
However, we conclude that the record is not sufficiently clear to resolve this point, and a remand is necessary for further proceedings. Those proceedings should take into account the Gift Tax Returns from 2000 and 2001 and determine what, if any, effect those documents have upon resolution of this issue.
We now turn to the $977,849 representing the net proceeds of the liquidation of inventory in decedent's business. We conclude that these funds constitute an asset that is not subject to distribution as part of the net estate. Rather, the funds comprise an ademption by satisfaction that inures to Junior's benefit.
N.J.S.A. 3B:3-46(a) defines an "ademption by satisfaction," in pertinent part, as follows:
Property which a testator gave in his lifetime to a person is treated as a satisfaction of a devise to that person in whole or in part, . . . if . . . the devisee acknowledges in writing that the gift is in satisfaction of the devise or that its value is to be deducted from the value of the devise.
Junior, the "devisee," has consistently maintained that the $977,849 proceeds are "in satisfaction of the devise" in Article Fourth of the will. There is no question that Article Fourth described a specific legacy, namely "so much of the tack and inventory as [decedent] may die possessed of in an unincorporated business known as 'Roosevelt Sales Stables.'"
The test of ademption of a specific legacy in this State is whether the subject is "lost, destroyed, or subsequently disposed of by testator, or so altered in form by testator's subsequent acts, as to indicate a change of testamentary intent on his part. Conversely, if the subject, although somewhat changed in form, be not sufficiently changed to indicate change of testamentary intent, there is no ademption." [Arenofsky v. Arenofsky, 29 N.J. Super. 209, 213 (App. Div. 1954) (citations omitted).]
"The intention of the testator therefore is involved only when his actions with reference to the subject matter of the bequest give rise to the inquiry as to whether there has been an ademption." Wycoff v. Young Women's Christian Ass'n, 37 N.J. Super. 274, 278 (Ch. Div. 1955). When considering the "nonexistence of the subject of a specific legacy at the time of death evidencing ademption . . . [t]estamentary intention is the criterion." White v. White, 105 N.J. Super. 184, 188 (Ch. Div. 1969).
N.J.S.A. 3B:3-33.1(a) provides that "[t]he intention of a testator as expressed in his will controls the legal effect of his dispositions, . . . unless the probable intention of the testator, as indicated by the will and relevant circumstances, is contrary." The Supreme Court has held that [i]n interpreting a will, our aim is to ascertain the intent of the testator. "[W]hen we say we are determining the testator's intent, we mean his probable intent." We continue to adhere to the view of the doctrine of probable intent expressed in Fidelity Union [Trust Co. v. Robert, 36 N.J. 561, 564 (1962)]. In that case, the Court stated that in determining the testator's subjective intent, "courts will give primary emphasis to his dominant plan and purpose as they appear from the entirety of his will when read and considered in the light of the surrounding facts and circumstances." The trial court should "ascribe to the testator 'those impulses which are common to human nature and . . . construe the will so as to effectuate those impulses.'" [In re Estate of Payne, 186 N.J. 324, 335, (2006) (citations omitted).]
"Courts are enjoined to 'strain' toward effectuating the testator's probable intent 'to accomplish what he would have done had he envisioned the present inquiry.'" In re Estate of Branigan, 129 N.J. 324, 332 (1992) (citations ommitted).
With these principles in mind, we discern nothing in the record to support respondents' position that by liquidating the assets and inventory of his business, decedent "indicate[d] a change of testamentary intent," Arenofsky, supra, 29 N.J. Super. at 213, with respect to the specific legacy in Article Fourth of his will. There is no evidence of decedent's intent that the proceeds of that liquidation pass through the residuary estate, as respondents claim. Indeed, the judge pointed to no such evidence in support of his decision.
We concur with Junior that, in deciding this issue, the motion judge misinterpreted and took out of context the statement from Judge Pursel's decision that "[t]here was never a gift made by the decedent to the two daughters or to the son for that matter but simply the formation of a Limited Partnership in which the daughters did not join." The judge found it "clear" from that statement that "there was never a gift made from the testator to Junior," and concluded that therefore, "the $977,849 cannot be deemed to be an ademption by satisfaction." We are satisfied that the quoted statement from Judge Pursel's decision relates exclusively to the Partnership and has no bearing on the funds at issue.
In sum, we conclude that the order of July 14, 2009 was not based upon sufficient credible evidence in the record as whole. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). The record demonstrated the long-term relationship between decedent and Junior in running the business known as "Roosevelt Sales Stable." When this relationship is considered in conjunction with the specific legacy in Article Fourth of decedent's will, we are satisfied that "what [decedent] would have done had he envisioned the present inquiry," Fid. Union Trust Co. v. Robert, 36 N.J. 561, 564-68 (1962) (internal quotations omitted), would have been to confer upon Junior the proceeds derived from the sale of the inventory. We therefore reverse the order of July 14, 2009.
Reversed in part; temporarily remanded in part to the motion judge for proceedings in conformity with this opinion. Remand proceedings shall be completed no later than January 31, 2011. The parties may, within ten days after receipt of the decision on remand, simultaneously serve and file any supplemental briefs they deem necessary. We retain jurisdiction.